Why Amyris is Focusing on Moisturizers, Not Fuel, for Now

Why Amyris is Focusing on Moisturizers, Not Fuel, for Now

Amyris, a company that uses synthetic biology to make alternatives to conventional petroleum products, recently decided to wind down its biofuels business, which sells ethanol and reformulated gasoline, and focus on selling higher-value products such as cosmetics. Now it’s clear why.

Details about Amyris were disclosed during the company’s earnings call last night. They show just how far the company is from making biofuel profitably.

Shortly after it was founded, Amyris had set out to make biofuel using genetically modified organisms and simple chemistry to turn sugar into a type of oil that’s similar to diesel. It had some success making bio-derived biodiesel for buses in Brazil. But the chemicals produced by the company’s microörganisms can be used for other things as well, such as moisturizers and fragrances, that sell for higher prices.

Last night, the company said the average selling price for all its products is $7.70 per liter, or $29 per gallon, far higher than the price for petroleum-based diesel. (In Brazil, diesel costs about $1 per liter. Amyris says it can sell its diesel-replacement for niche markets that command prices much higher than $1 a liter.)

The average price—which is propped up by the price it can charge for moisturizer—is higher than what Amyris sells bio-derived biodiesel for. (It didn’t disclose the exact price for the fuel.) But even $7.70 per liter isn’t enough for the company to break even.

According to its earnings report, Amyris lost about $95 million in the first quarter of 2012, compared to a loss of $33 million for the same period last year. CEO John Melo said the company expects to lower costs to the break-even point by the end of the year. He’s betting this can be done by focusing on improving the company’s production process—tweaking fermentation conditions, for example—rather than improving the microörganisms themselves.

Melo said the need to focus on operations and end a “bias toward R&D” was the reason he reorganized the company last week, pushing out employees such as Neil Renninger, one of the company’s cofounders and its chief technology officer. (Renninger is still a member of the board.)

Amyris is still producing biodiesel, in limited amounts, the company said last night. It is also still working on joint ventures that could allow it to build large plants for making fuels at some point in the future, but first it will try to make its moisturizer and fragrance business profitable. Meanwhile, it’s looking to raise new money this year, mainly through partnerships and collaboration agreements, to keep itself afloat.

CORRECTION: The original version of this story suggested that Amyris would completely stop selling biofuels. It will continue to sell limited amounts of its bio-derived diesel as it focuses on higher-value products.